Manufacturing PMI rises to 52.2 in September

Factory production improved a tad as September’s Purchasing Manager Index (PMI) rose to 52.2 per cent from 1.7 per cent of August. This is the 14th consecutive month of expansion.

This index, better known as the Nikkei India Manufacturing Purchasing Managers’ Index, is based on the survey conducted among purchasing executives in over 400 companies. These companies are divided into eight broad categories: Basic Metals, Chemicals & Plastics, Electrical & Optical, Food & Drink, Mechanical Engineering, Textiles & Clothing, Timber & Paper and Transport. Index over 50 shows expansion while below 50 means contraction. The index is prepared by IHS Markit and released along with a detailed report.

The report noted improvement in growth during September amid firmer gains in new orders, output and employment. Sales rose from both domestic and foreign clients, whilst manufacturers raised their buying activity and bolstered stocks of purchases in anticipation of further growth. On the price front, input costs rose at a stronger rate amid reports of higher prices for fuel and steel. Charges were subsequently increased at a slightly firmer pace. Manufacturers remain confident that output will increase over the coming year.

Cost pressure

Paul Smith, Economics Director at IHS Markit, said the manufacturing sector gained momentum during survey period, reflecting strengthening demand especially from foreign clients that helped drive export growth up to its highest level since the start of the year.

However, cost pressures reignited in September, exacerbated by a stronger US dollar which continues to raise the relative price faced by Indian manufacturers for goods such as steel and fuel. Output charges increased subsequently, albeit at a rate that remains well below the equivalent measure for input prices. “Rising prices continued to weigh on sentiment, with confidence dropping a little to reach a three-month low. Nonetheless, on balance, firms remain confident that output will continue to rise, buoyed by recent new business wins and expectations this will continue over the next 12 months,” Smith said.

According to the report, export sales strengthened, with the net gain the best recorded since the start of the year. High product quality was noted as a factor supporting total new order book growth. “Intermediate goods producers signalled a particularly strong increase in production, although growth was registered across all market groups. Increase in new orders and increased production helped drive growth of buying activity during September. In turn, this helped manufacturers to build inventories of purchases. Although modest, growth in pre-production goods was the sharpest recorded,” the report said.

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